Netflix opposes many usage-based billing plans, pointing out just how cheap …

Share this story

Some ISPs want to start charging customers by the gigabyte, or they want to set low data caps and charge overage fees. Netflix has a word for this idea: ripoff.

In the company's most recent financial report (PDF), released today, Netflix made clear its view that the move to usage-based billing is about ISP profit, not actual costs.

Wired ISPs have large fixed costs of building and maintaining their last mile network of residential cable and fiber. The ISPs’ costs, however, to deliver a marginal gigabyte, which is about an hour of viewing, from one of our regional interchange points over their last mile wired network to the consumer is less than a penny, and falling, so there is no reason that pay-per-gigabyte is economically necessary. Moreover, at $1 per gigabyte over wired networks, it would be grossly overpriced.

Netflix notes that it already delivers much of its traffic to "regional ISP front doors"; that is, it uses content delivery networks to get streaming video geographically close to customers who request it. That way, the video does not have to transit across the country on an ISP network, and local delivery should be quite inexpensive. (This was part of the recent peering spat between Comcast and Level 3, which is now carrying some Netflix traffic.)

Netflix pledges to "do what we can to promote the unlimited-up-to-a-large-cap model" and to keep the 'Net from a strict metering approach that becomes totally divorced from costs. Such metering would also have the effect, of course, of making an ISP's own video services, most of which are delivered separately from "the Internet," more attractive.

Internet users have largely sided with Netflix's view of the situation. They rebelled when Time Warner Cable tested low data caps and overage fees, eventually forcing the company to reverse course, and they're currently protesting so loudly in Canada that the government regulator has had to take some action. But when ISPs have set huge caps, like Comcast's 250GB limit, few complaints have arisen.